Petronet LNG Ltd. Absolute : Relative : Underweight...

November 9, 2017 Analyst: Maulik Patel [email protected] (+91-8128694110 +91 79-40504019) of 13

Before reading this report, you must refer to the disclaimer on the last page.

Petronet LNG Ltd. Absolute : REDUCE

Relative : Underweight

2QFY18 Results: Estimate(), TP (), Rating () Regular Coverage 4% Downside in 17 months

Best quarter, but Dahej reaching its peak volume, Downgrade to Reduce Oil & Gas

© 2017 Equirus All rights reserved

Rating Information

Price (Rs) 270

Target Price (Rs) 250

Target Date 31st Mar'19

Target Set On 9th Nov'17

Implied yrs of growth (DCF) 20

Fair Value (DCF) 250

Fair Value (DDM) 61

Ind Benchmark BSE OIL

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 320,925

Free Float (%) 50.00 %

52 Wk H/L (Rs) 275.2/162.9

Avg Daily Volume (1yr) 5,231,987

Avg Daily Value (Rs Mn) 1,093

Equity Cap (Rs Mn) 15,000

Face Value (Rs) 10

Bloomberg Code PLNG IN

Ownership Recent 3M 12M

Promoters 50.0 % 0.0 % 0.0 %

DII 12.8 % 0.6 % -3.2 %

FII 21.8 % -0.4 % 0.1 %

Public 15.4 % -0.2 % 3.1 %

Price % 1M 3M 12M

Absolute 6.5 % 23.0 % 43.7 %

Vs Industry 2.4 % 13.7 % 8.5 %

GAIL 1.0 % 18.2 % 38.8 %

GSPL 5.4 % 11.4 % 33.5 %

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) 5.0 6.1 5.3 6.3

EPS (18E) 2.9 3.9 3.4 4.0

Petronet (PLNG) posted record-high quarterly volumes of 220tbtus (+16%/+15%

yoy/qoq) in 2QFY18, despite India’s flat yoy LNG imports during the quarter on the

back of strong demand from refineries, power and fertilizers. Higher long-term

volumes (+30% yoy) along with an increase in regas margins pushed up EBITDA by 24%

yoy to Rs 9bn, 12% above EE. While FY18 would be strong for PLNG, Dahej would

face headwinds in next two years in the form of: (1) increased domestic gas

production and (2) competition from Mundra LNG amidst muted growth in LNG

demand. We see Dahej volumes peaking in FY18 but expect earnings growth to be

relatively muted at 7% CAGR over FY18-FY20E. Downgrade to REDUCE (from

ADD) with a Mar’19 DCF-based TP of Rs 250 (Sep’18 TP of Rs 218 earlier).

LNG demand at near-peak levels: A spurt in merchant tariffs led to a significant

demand uptick from power plants in September-October with LNG offtake in power

increasing to ~12mmscmd from 11mmscmd (Exhibit 2). Apart from refineries, 2Q

saw higher volume offtake for petchem with RIL starting its petcoke gasifier. In our

view, LNG demand is hitting its near-term peak (unless the government announces a

scheme for gas-based power plants) in the next 1-2 quarters, and this should reflect

in flattish or lower LNG imports in the coming quarters.

High domestic production, rising competition to hurt long-term volumes: A likely

increase in ONGC’s domestic gas production would replace LNG in fertilizer sectors

(most price taker in the segment) over the next two years. This would reduce LNG

demand and leave off-takers with some unsold long-term volumes. Also,

commissioning of the Mundra LNG terminal by Mar’18 should lead to some shift in

volumes, restricting Dahej volume growth in FY19E.

Can new growth avenues provide the required boost: PLNG is in advanced stages

of discussion for constructing a 7.5MTPA/2 MTPA terminal in Bangladesh/Sri

Lanka. GOI is also trying to make inroads for the use of LNG as a transportation fuel

for trucks. While these opportunities may provide a big boost to LNG volumes in the

long term, they are unlikely to happen any time in the near future.

2Q EBITDA above estimates: Volumes grew 16% yoy to 220tbtu, coming in 10%

above EE led by higher long-term and spot volumes. EBITDA was up 24% yoy to Rs

9bn primarily due to higher long-term contracts in contracted capacity and higher

regas margins. The tax rate declined to 31% from 32% in 2QFY17. Reported PAT at

Rs. 5.9bn was up 28% yoy on lower interest expenses and higher other income.

Change in Estimates:

Rs Mn FY18E %

Change FY19E

%

Change

Volume 15.5 0.6% 16.0 4.0%

Margin on Spot

Volume 33.0 -30.2% 52.3 10.6%

EBITDA 34,407 6.4% 38,124 17.9%

PAT 21,284 11.0% 24,014 25.3%

Consolidated Financials

Rs. Mn YE Mar FY17A FY18E FY19E FY20E

Sales 246,160 275,129 286,662 315,439

EBITDA 25,923 34,407 38,124 37,708

Depreciation 3,691 4,186 4,416 4,416

Interest Expense 2,097 1,660 1,200 920

Other Income 3,466 3,049 3,333 3,884

Reported PAT 17,057 21,284 24,014 24,292

Recurring PAT 17,057 21,284 24,014 24,292

Total Equity 80,939 103,338 120,148 137,152

Gross Debt 24,638 17,674 13,174 10,474

Cash 30,981 50,585 59,478 77,896

Rs. Mn YE Mar FY17A FY18E FY19E FY20E

Earnings 11.4 14.2 16.0 16.2

Book Value 54 69 80 91

Dividends 2.4 3.5 4.0 4.0

FCFF -12.7 16.4 14.6 19.5

P/E (x) 23.7 19.0 16.9 16.7

P/B (x) 5.0 3.9 3.4 3.0

EV/EBITDA (x) 12.7 8.8 7.6 7.1

ROE (%) 23 % 23 % 21 % 19 %

Core ROIC (%) 18 % 22 % 25 % 24 %

EBITDA Margin (%)

11 % 13 % 13 % 12 %

Net Margin (%) 7 % 8 % 8 % 8 %

PLNG Absolute –REDUCE Relative – Underweight 4% Downside in 17 months

November 9, 2017 Analyst: Maulik Patel [email protected] (+91-8128694110) of 12

Exhibit 1: Volumes increase qoq led by higher long term and re-gas volumes

Source: Equirus Securities, Company

Exhibit 2: LNG demand sector wise; Power sector took almost ~4-5mmscmd in September. Others include refineries/petchem; rise driven by RIL petcoke gasifier


Exhibit 3: Marketing margins see a sharp decline


Exhibit 4: Blended regasification margins improve on higher long term volumes


96

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Long Term (TBTU) Spot (TBTU) Regasification (TBTU)21.6

23.1

22.1

21.0

20.4

20.9

19.5

16.7

18.1

20.2

20.8

21.0

6.0

5.9

5.9

5.0

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0

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Sep-1

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Fertilizers Power CGD Others

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LT Regas Charge (Rs/mmbtu) Marketing Margin

0

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Blended Regas Margin (Rs/mmbtu)



Exhibit 5: Highest ever EBITDA/mmbtu


Exhibit 6: Blended regas tariffs increase qoq, reflecting processing of higher long term and regas volumes


Exhibit 7: Expect Kochi to ramp up gradually; Dahej also to work at higher utilization


Exhibit 8: EBITDA growth to moderate on high competition, lower domestic demand (Rs bn)


0

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Cost/mmbtu EBITDA/mmbtu (RHS)

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LT Regas Charge (Rs/mmbtu) Blended Regas (Rs/mmbtu)

Spot LNG Price- RHS ($/mmbtu)

9.4 10.0 10.9 13.7

15.0 15.0 15.4

0.1 0.4

0.3

0.3

0.5 1.0

2.0

0

2

4

6

8

10

12

14

16

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20

FY14

FY15

FY16

FY17

FY18E

FY19E

FY20E

Dahej Volumes Kochi Volumes

15.0 14.4 15.9

25.9

34.4

38.1 37.7

7.1 8.8 9.1

17.1

21.3 24.0 24.3

0

5

10

15

20

25

30

35

40

45

FY14 FY15 FY16 FY17 FY18E FY19E FY20E

EBITDA PAT



Exhibit 9: Post completion of re-gas facility by end-2019, Dahej nameplate facility

can touch 17.5MTPA (operationally it could go to 19MTPA). 95% of capacity is sold to

various off-takers and reduces earnings risk


Key Con-call Highlights:

Business update

During 2QFY18, PLNG recorded its highest-ever PBT at Rs 8.5bn (+26% yoy/+28% qoq)

and highest-ever PAT at Rs 5.9bn (+28% yoy/+35% qoq). This was mainly due to

higher volumes processed at both terminals along with better efficiency in

operations.

Overall volumes processed were also the highest-ever at 220tbuts (+16%/+15%

yoy/qoq).

The company is out of MAT and so full tax is applicable. The tax rate is expected to

be in range of 30-34%.

Unified tariff is for the pipeline and not for the terminal. Uncertainty over its

implementation at the entity level or national level remains, with PNGRB yet to

make a decision. PLNG is likely to enjoy benefits of a low-cost operator if unified

tariff is applicable.

PLNG sales are to aggregators GAIL, IOC, BPC, and GSPC. With the Dabhol terminal

shut down during monsoon, there was pressure on the Dahej terminal to meet

requirements; however, with Dabhol becoming operational by Sep-end or Oct-

beginning, pressure on Dahej will ease to some extent.

Regas service income stood at ~Rs 3.5bn in 1QFY18 and was at similar levels in

2QFY18.

To attain higher growth, PLNG is taking initiatives to develop a terminal outside

India.

The government has taken several positive measures to improve gas usage, and

hence the company is upbeat about gas demand in the country.

PLNG has three long-term contracts: two with RAS-Gas of 7.5+1 MTPA, and one with

Mobil Australia of 1.44 MTPA. PLNG is receiving all these volumes as per schedule.

While there can be certain flexibilities that the company can exercise before

finalizing the volumes for next year, it has to offtake at least some basic volumes.

While PLNG’s contracts are linked to oil prices which have surged in recent times, it

has not seen any impact on long-term contracts as long-term prices are lower than

spot prices currently.

While LNG business from trucks has good demand potential, it has to pass through

certain regulatory processes. China currently has ~300,000 trucks running on LNG and

there are strong prospects for this market in India too. PLNG will give reasonable

clarity on the potential of LNG demand from trucks next quarter when some

developments in this field have taken place.

The company saw power demand in the month of September after a lull in July and

August. It is unsure of power demand for the current quarter.

Current debt levels are Rs 20.2bn and cash balance Rs 38.2bn.

Capex for FY18 would be ~ Rs 2.3bn and would stay at similar levels for FY19 also.

Dahej volumes

The Dahej terminal at 210tbtus operated at 110% of its average increased nameplate

capacity. Its performance improved 14% qoq (184tbtus in 1QFY18) and 14% yoy

(185tbuts in 2QFY17).

Dahej expansion is going as per schedule and expanded capacity would be

operational by 4QFY18.

Gorgoan volumes

10-11tbuts of Gorgoan volumes were processed in Q1FY18 and Q2FY18 each.

The negotiation process for Gorgoan volumes is on, and documentation is under

discussion stages currently.

Kochi terminal

Kochi did its highest-ever LNG volumes i.e. 10tbtus with 15% utilization levels.

Kochi utilization is improving gradually, with single-digit volumes processed last year

improving to 12% in 1QFY18 and 15% in 2QFY18. A gradual improvement will be seen

until Kochi-Mangalore pipeline in fully connected and operational.

New terminal

Discussions are fairly at advanced stages for construction of terminals in Bangladesh

and Sri Lanka. No decision has been taken as yet.

RasGas, 8.5

GAIL, 2.5

GSPC, 2.2

IOC, 1.5

Torrent Power, 1

BPCL , 1 Remaining, 0.8



Quarterly Results Table

Rs Mn 2QFY18 2QFY18E 1QFY18 2QFY17 % Change

Comments 2QFY18E 1QFY18 2QFY17

Net Sales 77,702 62,808 64,351 66,144 24% 21% 17%

Consumption of raw materials 67,427 53,471 55,467 57,613 26% 22% 17%

Employees Cost 194 264 268 180 -27% -28% 7%

Other Expenditure 1,094 1,068 1,175 1,086 2% -7% 1%

Total Expenditures 68,715 54,803 56,909 58,880 25% 21% 17%

EBITDA 8,987 8,005 7,442 7,264 12% 21% 24%

Depreciation 1,039 1,024 1,027 860 1% 1% 21%

EBIT 7,949 6,982 6,415 6,405 14% 24% 24%

Interest 465 415 465 554 12% 0% -16%

Other Income 1,019 762 707 915 34% 44% 11%

PBT 8,503 7,329 6,658 6,765 16% 28% 26%

Tax 2,616 2,419 2,282 2,170 8% 15% 21%

Recurring PAT 5,888 4,910 4,376 4,596 20% 35% 28%

Extraordinaries 0 0 0 0

Reported PAT 5,888 4,910 4,376 4,596 20% 35% 28%

EPS (Rs) 3.9 3.3 2.9 3.1 20% 35% 28%

EBITDA Margin 11.6% 12.7% 11.6% 11.0% -118 bps 0 bps 58 bps

EBIT Margin 10.2% 11.1% 10.0% 9.7% -89 bps 26 bps 55 bps

PBT Margin 10.9% 11.7% 10.3% 10.2% -73 bps 60 bps 72 bps

PAT Margin 7.6% 7.8% 6.8% 6.9% -24 bps 78 bps 63 bps

Tax Rate 30.8% 33.0% 34.3% 32.1% -224 bps -351 bps -131 bps

Volume 220 200 192 189 10% 15% 16%

Long Term 134 109 106 103 23% 27% 30%

Spot 7 5 6 25 35% 26% -72%

Regas 79 85 81 61 -7% -2% 30%

Blended Regas Margin 51 52 50 48 -2% 1% 6%



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS

FY18E 14.2 13.4 6 % Increase in competition coupled with

decrease in domestic demand will lead

to decline in sales. FY19E 16.0 15.5 4 %

Sales FY18E 275,129 295,842 -7 %

FY19E 286,662 335,069 -14 %

PAT FY18E 21,284 19,585 9 %

FY19E 24,014 22,465 7 %

Our Key Investment arguments:

Increase in competition to put pressure on declining domestic volumes.

Current volume growth driven by expansion at Dahej; Industrial pickup and low spot

LNG; Kochi low utilization till KMB pipeline commission

EBITDA CAGR of 13% over FY17-20E driven by capacity expansion and increase in re-

gas tariff.

Rising domestic gas production and commencing of Mundra terminal will affect Dahej

volumes.

Key Forecasts:

FY16 FY17E FY18E FY19E

Dahej Volume (MTPA) 13.7 15.0 15.0 15.4

Kochi Volume (MTPA) 0.3 0.5 1.0 2.0

Blended Margin (Rs/mmbtu) 36 43 46 42

Risk to Our View

Weak spot LNG price and faster recovery in volume, Resolution to KMB Pipeline

Key Triggers

Recovery in spot LNG price

Sensitivity to Key Variables % Change % Impact on EPS

Regas Margin 10 % 14 %

Spot Volume 10 % 3 %

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.7 % 1.0 12.7 % 3.0 % 30.0 %

- FY18E FY19E FY20-22E FY23-27E FY28-37E

Sales Growth 12 % 4 % 7 % 6 % 4 %

NOPAT Margin 7 % 8 % 7 % 7 % 8 %

IC Turnover 3.06 3.08 3.67 4.27 5.39

RoIC 22.4 % 25.2 % 26.9 % 32.7 % 44.5 %

Years of strong growth 1 2 5 10 20

Valuation as on date (Rs) 135 143 161 188 212

Valuation as of Mar'19 159 169 191 222 250

Based on DCF, assuming 20 years of 4% CAGR sales growth 8% NOPAT margin, we derive

current fair value of Rs.212 and Mar’19 fair value of Rs.250.

Company Description:

Petronet LNG is a joint venture between GAIL, ONGC, IOC and BPCL and engaged in

regasification of LNG. PLNG operate Dahej terminal (15.0MTPA capacity) and currently

building Gangavaram terminal to bridge India’s gas deficit. PLNG has long term contract

to source LNG and has entered back-to-back contracts with off-takers.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E

Petronet LNG REDUCE 270 320,925 250 31st Mar'19 11.4 14.2 16.0 23.7 19.0 16.9 54.0 3.9 23 % 23 % 21 % 1.9 % 1.3 %

GAIL ADD 452 764,469 400 30th Sep'18 18.7 25.1 28.7 24.2 18.0 15.8 232.4 1.8 8 % 10 % 11 % 1.5 % 2.3 %

GSPL LONG 216 121,735 232 30th Sep'18 8.8 10.9 13.7 24.5 19.7 15.8 79.8 2.4 12 % 13 % 14 % 0.8 % 0.9 %



Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18A 2Q18A 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E

Revenue 53,373 66,144 62,993 63,651 64,351 77,702 66,748 66,328 66,085 66,085 75,075 79,417 246,160 275,129 286,662 315,439

Consumption of raw materials 45,768 57,613 55,569 55,220 55,467 67,427 57,187 55,245 55,245 55,245 63,398 68,695 214,169 235,326 242,584 271,017

Employees Cost 183 180 194 181 268 194 209 195 335 242 261 243 739 865 1,081 1,352

Other Expenditure 998 1,086 1,159 2,086 1,175 1,094 1,135 1,128 1,123 1,123 1,276 1,350 5,330 4,531 4,873 5,362

EBITDA 6,425 7,264 6,071 6,163 7,442 8,987 8,217 9,760 9,381 9,474 10,140 9,129 25,923 34,407 38,124 37,708

Depreciation 806 860 1,009 1,016 1,027 1,039 1,047 1,074 1,104 1,104 1,104 1,104 3,691 4,186 4,416 4,416

EBIT 5,619 6,405 5,062 5,147 6,415 7,949 7,171 8,686 8,277 8,370 9,036 8,025 22,232 30,221 33,708 33,292

Interest 556 554 517 469 465 465 415 316 300 300 300 300 2,097 1,660 1,200 920

Other Income 494 915 550 1,508 707 1,019 762 561 833 833 833 833 3,466 3,049 3,333 3,884

PBT 5,556 6,765 5,095 6,186 6,658 8,503 7,518 8,931 8,811 8,903 9,569 8,558 23,602 31,610 35,842 36,256

Tax 1,777 2,170 1,121 1,478 2,282 2,616 2,481 2,947 2,908 2,938 3,158 2,824 6,545 10,326 11,828 11,965

Recurring PAT 3,779 4,596 3,975 4,708 4,376 5,888 5,037 5,984 5,903 5,965 6,411 5,734 17,057 21,284 24,014 24,292

Extraordinary 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Reported PAT 3,779 4,596 3,975 4,708 4,376 5,888 5,037 5,984 5,903 5,965 6,411 5,734 17,057 21,284 24,014 24,292

EPS (Rs) 2.52 3.06 2.65 3.14 2.92 3.93 3.36 3.99 3.94 3.98 4.27 3.82 22.74 14.19 16.01 16.19

Key Drivers

Volume (TBTU) 168 189 191 180 192 220 189 205 200 200 213 221 728 806 833 905

Regas Margin (Rs/mmbtu) 47 48 39 51 50 51 59 64 64 64 64 52 46 56 61 52

Implied marketing margin on spot (Rs/mmbtu)

67 56 -42 252 25 6 50 52 52 52 52 54 83 33 52 55

- - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -12 % 24 % -5 % 1 % 1 % 21 % -14 % -1 % 0 % 0 % 14 % 6 % - - - -

Consumption of raw materials -17 % 26 % -4 % -1 % 0 % 22 % -15 % -3 % 0 % 0 % 15 % 8 % - - - -

EBITDA 29 % 13 % -16 % 2 % 21 % 21 % -9 % 19 % -4 % 1 % 7 % -10 % - - - -

EBIT 35 % 14 % -21 % 2 % 25 % 24 % -10 % 21 % -5 % 1 % 8 % -11 % - - - -

Recurring PAT 54 % 22 % -14 % 18 % -7 % 35 % -14 % 19 % -1 % 1 % 7 % -11 % - - - -

EPS 54 % 22 % -14 % 18 % -7 % 35 % -14 % 19 % -1 % 1 % 7 % -11 % - - - -

Yearly Growth (%)

Revenue -36 % -12 % 22 % 5 % 21 % 17 % 6 % 4 % 3 % -15 % 12 % 20 % -9 % 12 % 4 % 10 %

EBITDA 78 % 54 % 114 % 24 % 16 % 24 % 35 % 58 % 26 % 5 % 23 % -6 % 63 % 33 % 11 % -1 %

EBIT 100 % 64 % 149 % 24 % 14 % 24 % 42 % 69 % 29 % 5 % 26 % -8 % 76 % 36 % 12 % -1 %

Recurring PAT 53 % 82 % 133 % 92 % 16 % 28 % 27 % 27 % 35 % 1 % 27 % -4 % 87 % 25 % 13 % 1 %

EPS 53 % 82 % 133 % 92 % 16 % 28 % 27 % 27 % 35 % 1 % 27 % -4 % 87 % -38 % 13 % 1 %

Margin (%)

EBITDA 12 % 11 % 10 % 10 % 12 % 12 % 12 % 15 % 14 % 14 % 14 % 11 % 11 % 13 % 13 % 12 %

EBIT 11 % 10 % 8 % 8 % 10 % 10 % 11 % 13 % 13 % 13 % 12 % 10 % 9 % 11 % 12 % 11 %

PBT 10 % 10 % 8 % 10 % 10 % 11 % 11 % 13 % 13 % 13 % 13 % 11 % 10 % 11 % 13 % 11 %

PAT 7 % 7 % 6 % 7 % 7 % 8 % 8 % 9 % 9 % 9 % 9 % 7 % 7 % 8 % 8 % 8 %



Consolidated Financials

P&L (Rs Mn) FY17A FY18E FY19E FY20E

Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E

Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E

Revenue 246,160 275,129 286,662 315,439 Equity Capital 7,500 15,000 15,000 15,000 PBT 23,602 31,610 35,842 36,256

Op. Expenditure 220,238 240,722 248,538 277,731 Reserve 73,439 88,338 105,148 122,152 Depreciation 3,691 4,186 4,416 4,416

EBITDA 25,923 34,407 38,124 37,708 Networth 80,939 103,338 120,148 137,152 Others 436 0 0 0

Depreciation 3,691 4,186 4,416 4,416 Long Term Debt 24,638 17,674 13,174 10,474 Taxes Paid 3,780 10,326 11,828 11,965

EBIT 22,232 30,221 33,708 33,292 Def Tax Liability 13,858 15,821 15,321 15,021 Change in WC -3,273 34 167 -2

Interest Expense 2,097 1,660 1,200 920 Minority Interest 0 0 0 0 Operating C/F 20,676 25,505 28,597 28,705

Other Income 3,466 3,049 3,333 3,884 Account Payables 9,446 7,737 7,975 8,910 Capex -5,460 -2,015 -7,500 0

PBT 23,602 31,610 35,842 36,256 Other Curr Liabi 9,411 13,756 14,333 15,772 Change in Invest -26,489 0 0 0

Tax 6,545 10,326 11,828 11,965 Total Liabilities & Equity 138,291 158,327 170,952 187,330 Others 198 0 0 0

PAT bef. MI & Assoc. 17,057 21,284 24,014 24,292 Net Fixed Assets 84,185 79,999 85,583 81,167 Investing C/F -31,751 -2,015 -7,500 0

Minority Interest 0 0 0 0 Capital WIP 486 2,500 0 0 Change in Debt -3,128 -6,964 -4,500 -2,700

Profit from Assoc. 0 0 0 0 Others 4,594 4,594 4,594 4,594 Change in Equity 0 7,500 0 0

Recurring PAT 17,057 21,284 24,014 24,292

Inventory 5,405 3,769 3,927 4,321 Others -4,354 -4,422 -7,704 -7,588

Extraordinaires 0 0 0 0 Account Receivables 12,108 13,533 14,100 15,516 Financing C/F -7,482 -3,885 -12,204 -10,288

Reported PAT 17,057 21,284 24,014 24,292 Other Current Assets 533 3,347 3,270 3,836 Net change in cash -18,557 19,605 8,892 18,418

FDEPS (Rs) 11.4 14.2 16.0 16.2 Cash 30,981 50,585 59,478 77,896 RoE (%) 23 % 23 % 21 % 19 %

DPS (Rs) 2.4 3.5 4.0 4.0 Total Assets 138,291 158,327 170,952 187,330

RoIC (%) 16 % 17 % 17 % 16 %

CEPS (Rs) 27.7 17.0 19.0 19.1 Non-cash Working Capital -811 -845 -1,012 -1,009

Core RoIC (%) 18 % 22 % 25 % 24 %

FCFPS (Rs) -12.7 16.4 14.6 19.5 Cash Conv Cycle -1.2 -1.1 -1.3 -1.2 Div Payout (%) 26 % 30 % 30 % 30 %

BVPS (Rs) 54.0 68.9 80.1 91.4 WC Turnover -303.6 -325.6 -283.3 -312.5 P/E 23.7 19.0 16.9 16.7

EBITDAM (%) 11 % 13 % 13 % 12 % FA Turnover 2.9 3.3 3.3 3.9 P/B 5.0 3.9 3.4 3.0

PATM (%) 7 % 8 % 8 % 8 % Net D/E -0.1 -0.3 -0.4 -0.5 P/FCFF -21.2 16.5 18.5 13.8

Tax Rate (%) 28 % 33 % 33 % 33 % Revenue/Capital Employed 2.6 2.6 2.5 2.5 EV/EBITDA 12.7 8.8 7.6 7.1

Sales Growth (%) -9 % 12 % 4 % 10 %

Capital Employed/Equity 1.8 1.7 1.6 1.4

EV/Sales 1.3 1.1 1.0 0.9

FDEPS Growth (%) -7 % 25 % 13 % 1 %

Dividend Yield (%) 1.9 % 1.3 % 1.5 % 1.5 %

TTM P/E vs. 2 yr forward EPS growth TTM P/B vs. 2 yr forward RoE

8x

12x

16x

20x

24x

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

0

80

160

240

320

400

480

560

640

720

Mar/

11

Sep/11

Mar/

12

Sep/12

Mar/

13

Sep/13

Mar/

14

Sep/14

Mar/

15

Sep/15

Mar/

16

Sep/16

Mar/

17

Sep/17

Mar/

18

EPS Growth

4x

0%

10%

20%

30%

40%

-

60

120

180

240

300

360

420

480

540

600

660

720

780

Mar/

11

Sep/11

Mar/

12

Sep/12

Mar/

13

Sep/13

Mar/

14

Sep/14

Mar/

15

Sep/15

Mar/

16

Sep/16

Mar/

17

Sep/17

Mar/

18

RoE

1x

2x

3x

5x



Historical Consolidated Financials

P&L (Rs Mn) FY14A FY15A FY16A FY17A

Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A

Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A

Revenue 377,476 395,010 271,334 246,160 Equity Capital 7,500 7,500 7,500 7,500 PBT 10,545 9,849 11,993 23,602

Op. Expenditure 362,491 380,620 255,472 220,238 Reserve 42,361 49,386 58,640 73,439 Depreciation 3,081 3,154 3,216 3,691

EBITDA 14,985 14,390 15,863 25,923 Networth 49,861 56,886 66,140 80,939 Others 5,957 1,834 1,189 436

Depreciation 3,081 3,154 3,216 3,691 Long Term Debt 31,965 35,541 30,696 24,638 Taxes Paid 5,387 2,088 1,996 3,780

EBIT 11,904 11,236 12,647 22,232 Def Tax Liability 5,568 7,313 14,000 13,858 Change in WC 4,037 -4,451 19,340 -3,273

Interest Expense 2,196 2,935 2,388 2,097 Minority Interest 0 0 0 0 Operating C/F 18,234 8,298 33,741 20,676

Other Income 838 1,548 1,733 3,466 Account Payables 18,868 3,209 7,721 9,446 Capex -8,406 -8,279 -9,724 -5,460

PBT 10,545 9,849 11,993 23,602 Other Curr Liabi 12,865 8,287 5,704 9,411 Change in Invest 0 1,105 941 -26,489

Tax 3,426 1,024 2,860 6,545 Total Liabilities & Equity 119,127 111,236 124,262 138,291 Others 721 520 246 198

PAT bef. MI & Assoc. 7,119 8,825 9,133 17,057 Net Fixed Assets 62,650 69,426 68,037 84,185 Investing C/F -7,685 -6,654 -8,538 -31,751

Minority Interest 0 0 0 0 Capital WIP 8,799 7,469 15,505 486 Change in Debt -2,420 -6,128 -2,803 -3,128

Profit from Assoc. 0 0 0 0 Others 3,420 7,708 4,861 4,594 Change in Equity 0 0 0 0

Recurring PAT 7,119 7,119 7,119 7,119 Inventory 9,557 8,826 2,461 5,405 Others -5,282 -4,212 -4,191 -4,354

Extraordinaires 0 0 0 0 Account Receivables 20,157 13,428 9,885 12,108 Financing C/F -7,702 -10,340 -6,994 -7,482

Reported PAT 7,119 7,119 7,119 7,119 Other Current Assets 1,717 758 1,684 533 Net change in cash 2,846 -8,696 18,210 -18,557

EPS (Rs) 9.5 11.8 12.2 11.4 Cash 12,826 3,621 21,829 30,981

RoE (%) 15 % 17 % 15 % 23 %

DPS (Rs) 1.2 1.0 1.0 2.4

Total Assets 119,127 111,236 124,261 138,291

RoIC (%) 10 % 12 % 10 % 16 %

CEPS (Rs) 13.6 16.0 16.5 27.7 Non-cash Working Capital -302 11,517 604 -811 Core RoIC (%) 12 % 12 % 11 % 18 %

FCFPS (Rs) 16.0 5.7 36.0 -12.7 Cash Conv Cycle -0.3 10.6 0.8 -1.2 Div Payout (%) 31 % 20 % 19 % 26 %

BVPS (Rs) 33.2 37.9 44.1 54.0 WC Turnover -1,249.9 34.3 448.9 -303.6

P/E 28.4 22.9 22.2 23.7

EBITDAM (%) 4 % 4 % 6 % 11 % FA Turnover 5.3 5.1 3.2 2.9 P/B 8.1 7.1 6.1 5.0

PATM (%) 2 % 2 % 3 % 7 % Net D/E 0.4 0.6 0.1 -0.1 P/FCFF 16.8 47.4 7.5 -21.2

Tax Rate (%) 32 % 10 % 24 % 28 % Revenue/Capital Employed 5.6 5.3 3.3 2.6 EV/EBITDA 23.4 25.5 22.6 12.7

Sales growth (%) 20 % 5 % -31 % -9 %

Capital Employed/Equity 2.2 1.9 1.8 1.8

EV/Sales 0.9 0.9 1.3 1.3

FDEPS growth (%) -38 % 24 % 3 % -7 %

Dividend Yield (%) 0.9 % 0.7 % 0.7 % 1.9 %



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